A/C Balance: Why ICICI's Move Was Not Thuggery

The bank's action on minimum account balance was a response to structural shifts underway in the banking sector

- howindialives.com

The announcement by ICICI Bank in August that it was raising its minimum balance requirement for new savings accounts by five times, from ₹10,000 to ₹50,000, received so much criticism that the bank backtracked within a couple of days. Since most Indians earn much less than ₹50,000 a month, there was a sense that ICICI's actions amounted to financial exclusion of the majority.

The bank's response to the backlash was swift: it tempered the quantum of the hike to 50%, setting it at a considerably lower ₹15,000. The quick damage control was probably sufficient to soothe customer outrage.

However, it would be wrong to view the move as "loot, thuggery of the middle class", as alleged by some netizens. Rather, it should be seen as the bank's response to structural shifts in the banking sector. There are winds of change blowing through the financial system, and as banks adapt to these changes, more such actions can be expected in future.

In a July 2024 speech delivered in Mumbai, then Reserve Bank of India (RBI) governor Shaktikanta Das described the financial landscape in India as going through a structural transformation, driven by two broad factors: technology and changing patterns of savings and investment.

TECHNOLOGY MEETS GEN Z

Technological advances have led to rapid growth in digital banking and created customer expectations of frictionless transactions. The result is that Indian banks have invested heavily in digital systems to retain customers, especially younger ones. At the same time, fintech companies have set up platforms where customers can save, borrow, invest or spend easily, all with a few mouse clicks. Fintechs do all that banks can, and more. Not surprisingly, an increasing number of Gen Zs prefer the click-and-connect model of fintechs over traditional banking systems.